8th April 2022

Sailing through a redundancy process: lessons from P&O

Like Block & Quayle; Hennes & Mauritz; and Billington & Mayman, The Peninsular and Oriental Steam Navigation Company are better known by their initials. However, unlike their abbreviated counterparts, P&O have attracted a tidal wave of critical headlines in recent weeks due to their flouting of UK employment law.

Last month P&O took the decision to dismiss approximately 800 of its UK based staff without providing them with any notice of termination or following any process. To compound matters, staff were told they were being dismissed by way of a video call which came entirely out of the blue. The decision to dismiss its staff in this manner seems to have been a calculated one taken for commercial reasons, with P&O stating that it could not remain a viable business by retaining its workforce and reports suggest the company’s plan is to replace those who have been dismissed with agency workers on lower pay. This explanation has attracted outrage and the business is under both a criminal and civil investigation by the Insolvency Service as a result of their actions.

The story acts as a reminder of the importance of one of the key parts of any redundancy procedure- that of the duty to consult with employees about proposals and to do so at a stage where that consultation can be meaningful.

The obligation to consult with staff about proposed redundancies can arise in two different forms.

Where an employer proposes to dismiss 20 or more employees working at the same establishment within a 90-day period, the statutory obligation to collectively consult with staff arises. In practice, the duty is to consult with employee representatives. This can mean representatives of a recognised trade union; employee representatives elected for other purposes; or representatives elected specifically for the purposes of consulting on proposed redundancies.

An employer is obliged to conduct consultation “with a view to reaching an agreement” with the staff who are at risk of redundancy and case law sets out the following as being key to fair consultation:

  • Consultation when the proposals are still at a formative stage.
  • Provision of adequate information on which to respond.
  • Provision of adequate time in which to respond.
  • Conscientious consideration of the response to consultation.
  • Consultation entered into with an open mind and with a willingness to be persuaded.
  • Giving the body consulted a fair and proper opportunity to understand fully the matters about which it is being consulted and to express its views on those subjects, with the consultor thereafter considering those views properly and generally.

While consultation must begin in good time before any dismissals take effect, there are no set time limits as to when it should commence. However, where the duty to collectively consult arises there is a protected period during which no dismissals can take effect (30 days where between 20 and 99 dismissals are proposed; 45 days where 100 or more dismissals are proposed).

A standalone claim for failure to collectively consult can be raised on behalf the affected employees where the employer fails to comply with this duty. If upheld, all employees can receive an award of up to 90 days pay. Additionally, where there is a failure to meaningfully collectively consult this can affect the fairness of subsequent dismissals.

In addition to the potential obligation to collectively consult, there is always a duty to consult on an individual basis with any employee who it is proposed be dismissed by reason of redundancy. Where collective consultation is also required, this does not replace the obligation to consult on an individual basis- it is in addition to it.

Individual consultation with employees is fundamental to the fairness of any dismissal for redundancy. Where there is no meaningful consultation any decision to dismiss will almost inevitably be found to be unfair. Case law suggests the bare minimum period consultation should last is 7 days, but the shorter the consultation period the greater likelihood that a tribunal will take the view no meaningful consultation has taken place.

Individual consultation should include the following:

  • An opportunity for the employee to comment on the basis for selection.
  • An opportunity for the employee to challenge their redundancy selection assessment.
  • An opportunity for the employee to put forward any suggestions for ways to avoid their redundancy.
  • Consideration of any alternative employment positions that may exist.
  • An opportunity for the employee to address any other matters or concerns that they may have.

As P&O have found at the cost of their reputation, failure to properly engage in meaningful discussion with employees about proposed redundancies can lead to a storm of bad publicity and would ordinarily lead to waves of claims. The former in P&O’s case has extended to government ministers going so far as to state that the law will be changed as a result of its actions. It would seem that the latter has been avoided due to P&O making offers to all employees equivalent to the maximum value of any claims that could be pursued before the Employment Tribunal, with all but one employee reportedly accepting those proffers. On this front alone, it seems that the commercial rationale behind P&O’s actions has achieved its intended, though unseemly, purpose.

Consultation is key to any fair redundancy procedure. By ensuring full and meaningful consultation takes place at an early stage of a redundancy process, employers can ensure they avoid the course plotted by P&O; sail through calmer waters in managing what is by its very nature a difficult and unpleasant situation; and indulge in some “R&R” instead of spending time, effort and money in dealing with claims.

If you have any redundancy or employment law questions, please contact a member of the Blackadders Employment Team working in Aberdeen, Dundee, Edinburgh, Glasgow, Perth and across Scotland.

Stephen Connolly, Partner
Employment Law
Blackadders LLP


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